By R. Emmett Tyrrell, Jr. on 5.11.06 @ 12:08AM
Once again tax cuts create greater wealth and tax revenue -- and Republicans and Democrats alike get increasingly nervous.
WASHINGTON -- It is very reassuring that Republican negotiators
in the House and Senate have reached an agreement to extend
President George W. Bush's cuts in tax rates on dividends and
capital gains. Equally reassuring, the negotiators plan to liberate
as many as 15 million middle-income Americans from the impending
burden of the alternative minimum income tax. Now the unparalleled
economic growth that has characterized the American economy since
the early 1980s can proceed. My only question is why?
Why did the Republicans extend these tax cuts? Many of them are
the same solons who offered the embarrassing quackery of a $100
rebate to ameliorate the burden of high oil prices. I doubt that
politicians who think a $100 rebate is a sound economic response to
an oil price increase reflecting the scarcity of oil really
understand the value of marginal tax cuts. They put me in mind of
President Jimmy Carter offering Americans rebates as a response to
his opponent's offer of tax cuts in the 1980 presidential race.
Such politicians have enjoyed enormous economic growth since the
Reagan tax cuts that followed his election but apparently do not
know where the growth comes from.
We saw the growth rev up again early in the Bush administration
following his tax cuts, the tax cuts that have now been extended.
The President says we cut taxes to "put money into the tax payers'
pockets." But there is more to it. We cut taxes to increase
economic activity, to reduce the burden of taxation on workers to
encourage their increased output. We cut taxes on investments,
stocks, and dividends to increase investments, stocks, and
dividends -- to increase wealth. That is what has been happening --
FOR TWO DECADES.
Democrats -- and I fear many Republicans -- think we cut taxes
to reward the rich. Democrats would raise taxes to punish the rich
and to increase tax revenue for their favorite projects. Perhaps
they could find some other way to punish the rich. Their
demagoguery impedes economic growth and -- as their phrase has it
-- "revenue enhancement."
Those of us who favor tax cuts can now look proudly at the
recent record of tax payments. According to the Treasury
Department's monthly report, tax receipts were up 11.2 percent for
the first seven months of Fiscal 2006. That is $137 billion. In
Fiscal 2005 tax receipts were up 14.6 percent, which is $274
billion. These increases come as a great surprise to those
Democrats and Republicans who insist tax cuts cause deficits. Holed
up over at the Congressional Budget Office (CBO), their minions
issue predictions of puny revenue growth following tax cuts that
are always gloomy and always wrong. The CBO's recent predictions
for Fiscal 2006 were $76 billion for the whole year for individual
tax receipts and $24 billion for corporate receipts. Seven months
into the year the respective figures are already $56 billion and
$40 billion.
Unburdened by high taxes, the rich paid more in taxes. By
lowering marginal tax rates we have encouraged economic vigor and
put more money in the government's hands. This we call Supply-Side
Economics. Yet many Republicans remain agnostic and many more
Democrats are contemptuous of it. This is a cultural problem. In
the culture of economic ideas many on Capitol Hill will not look at
the evidence of the past two decades. They are living in an era of
great prosperity and do not know how they arrived at it.
There is a bigotry against the term Supply-Side Economics. That
is the only way to explain it. The prejudices of those who for
decades have believed that what is best for society is a government
that taxed and spent restrain them from reviewing the mounting
evidence to the contrary. Prejudice and bigotry are not all that
unusual in the human condition. In modern governance, however, it
is unusual to see an orthodoxy remain influential so long after it
has been proven false. That the orthodoxy of tax and spend is still
dominant on Capitol Hill I have no doubt. This is why for me the
Republicans' extension of these tax cuts is a kind of miracle.
topics:
Taxes, Economics, Oil
